The Study On Chinese LED Enterprise Industrial Chain Extension Impact On Financial Performance

Nowadays, with the consistently deepening economic and energetic crisis, all global economic entities have faced major tests. Exploration of strategic emerging industries has already become the focus that countries all over the world have paid attention to. China has also emphasized on the exploration of such industry, with the expectation to inject fresh blood into traditional industries and promote economic development in the long run. LED lighting is one of strategic emerging industries that people think highly of prospects at the present stage. Products are not only advanced, but also conform to the concept of energy saving and emission reduction advocated by the society, thus it catches attention of countries all over the world. However, at the present stage, most domestic lighting enterprises have failed to get actual profits as expected. Their international competitiveness is comparatively inadequate, which is mainly because that they have played a role of the middle part of Smiling Curve for a long time in the industrial chain. Profits of this period are extremely low. Extension of industrial chain enables enterprises to enter the links of high profit margin, namely the link of technology R&D and market development. However, in the meanwhile of extending industrial chain, it will also bring heavy management fees to enterprises. Consequently, it is necessary to specify the internal relation between extension of industrial chain and enterprise performance, and also explore how to fatherly improve the overall competitiveness of enterprises by extending the industrial chain.In this paper, based on the dynamic thinking, we analyzed the industry chain extension effect mechanism and effects of financial performance. Study on the method of focusing case study, we select representative San’an Optoelectronics as case. Firstly, the paper analyzed the external environment, the status and trend of San’an Optoelectronics industry chain extension. Secondly, we analyzed the effect mechanism between industry chain extension and financial performance. Finally, we analyzed the dynamic changes of enterprise strategy under the short-term market performance and long-term accounting performance to extend the industrial chain. The short-term performance focuses on the analysis of the industrial chain extension of reality influence performance of major events the company’s stock price. Long-term financial performance focuses on the analysis of enterprise accounting performance(five dimensions including profitability, cash creation ability, the value creation ability, risk control ability and growth ability). Overall, through the extension of industrial chain, San’an Optoelectronics‘s external problems become the internal problems, it reduce the industry supply chain risk faced by the company, improve the overall competitiveness of the company in the industrial chain, the last significant to enhance the company’s short-term and long-term financial performance. In current macro-economic downward trend, this paper has important significance to China’s manufacturing companies which are seeking market breakthrough and competitive capability development.